Factoring for contractors

Regardless of what industry you work in, life as a contractor can be immensely rewarding, fulfilling but also tough at times. It’s not hard to see the appeal of becoming a contractor, the freedom and financial gains can be significant, as can the flexibility to work where you want, when you want. However, as with many things in life, things aren’t always as straightforward as they seem. Cash flow can be a big problem for some contractors due to a number of reasons including:

● Labour intensive work
● Payments being made to suppliers or subcontractors before receiving cash payments from the project in question
● Retainage
● Slow payers

A poor cash flow can seriously harm you financially and even wipe you out completely so it is important to have a strategy to deal with the inevitable contractor cash flow problems so you can work and make more money with the peace of mind you will always have access to cash.

Why Factoring For Contractors Makes Sense

Factoring for small businesses has for a long time been an accepted, convenient and cost effective way of improving their cash flow by accessing the cash tied-up with their invoices. This can enable the to pay their suppliers and staff on time even if their clients have not paid them on-time. This is done by the factoring company buying the debt of the businesses for a slightly lesser amount than the invoices value. The business may receive a little bit less than they invoiced but what is important for cash flow is that they receive the money straight away instead of having to wait 30, 60 or in some cases 90 days.

Contractor factoring goes one step further and gives you access to the cash that is tied up in your timesheets. For just a small percentage of the cash tied up in your timesheets, you could have them paid into your account within as little as 24 hours.

3 Situations In Which You Might Need Contractor Factoring

Transitioning From Umbrella to PAYE or Limited Company – Undertaking this sort of transfer can sometimes stretch you financially depending upon your personal financial situation. You could be waiting up to nine weeks for the payment of your first invoice which can be an awfully long time without money! Using factoring however will let you access the money with every approved timesheet.

Cash For Equipment Or Training – If you need a lump sum quickly to invest in new equipment or training, then factoring is the perfect solution. Within a day, you can have access to the cash you need to get the training or equipment that is essential to your work.

Short Term Cash Flow – Sometimes as a contractor you can face short term cash flow problems for a whole range of reasons. Factoring is the perfect solution to get you across these short term cash flow worries.

If you want to know more about factoring and how it can help you then call your independent factoring broker on 01827 707680 for a free, no obligation chat.